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| Using a GraphThe same information that is presented using words or a table can also be shown on a graph. In economics, we typically use a two-dimensional graph that has the price of the good or service on one axis and the quantity that people are willing and able to buy on the other axis. This way of presenting the information corresponds to the tables above. For example, the information presented in the first table can be shown on a graph as: Each point on the graph represents a point on the table. The top point shows that when the price of a bottle of red wine is $30, consumers are willing and able to buy 10,000 cases of wine. Using the terminology presented above, the "quantity demanded" of wine is 10,000 when the price of a bottle of wine is $30. The middle point shows that the quantity demanded of wine is 30,000 when the price of a bottle is $20; the bottom point shows that the quantity demanded of wine is 50,000 cases when the price of a bottle of wine is $10. Notice that we have the same points as before. But by drawing a line, we showing what we expect consumers to be willing/able to buy at other prices. For example, if the quantity demanded is 50,000 at a price of $10 and 30,000 at a price of $20, we might expect consumers to be willing and able to buy 40,000 (half-way between 30,000 and 50,000) when the price of a bottle is $15 (half-way between $10 and $20). Notice that all three points (and the line that joins them) lie to the right of the original line. For example, look at the case where the price of a bottle of wine is $30; the first demand curve (on the left) shows us that before the studies were released consumers were willing/able to buy 50,000 cases of wine; the second demand curve (on the right) shows us that after the studies were released, consumers were willing/able to buy 80,000 cases of wine. At each point on the second demand curve, consumers are willing/able to buy more wine. This reflects an increase in demand. So a "change in demand" is shown by a shift in the entire demand curve - it requires us to draw an entirely new demand curve. | |||||||||
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